Accounting norm exemption to enable IRFC raise additional debt

Ministry of Corporate Affairs on Monday exempted the application of the provisions relating to deferred tax under Ind AS 12 for specified state-owned for a period of seven years.

PTI

February 06, 2018, 22:38 IST

Updated: February 06, 2018, 22:48 IST

New Delhi, Feb 6 -- The Indian Railway Finance Corp (IRFC) can now raise additional debt of more than Rs 63,000 crore, following the government exempting it from the ambit of a Indian Accounting Standard pertaining to deferred tax liability, an official release said today.

The corporate affairs ministry has exempted certain class of government companies that are notified as public financial institution under the Companies Act and those registered as NBFC with the Reserve Bank, among others, from following Accounting Standard-22 (AS-22)/ Ind-AS 12 for seven years.

The particular standard relates to recognition of provision for deferred tax.

The release said the exemption is going to largely benefit IRFC, part of the railway ministry which helps in raising predominant portion of the extra budgetary resources through financial leasing model.

"The accumulated Deferred Tax Liability is Rs 6,392 crore as on March 31, 2017 which is going to be reversed and will form part of the net worth.

"Besides, the provision for tax will come down to 21 per cent from 56 per cent leading to substantial improvement in profit after tax, earnings per share and book value per share," it said.

According to the release, to the extent of the reversed DTL amount, equity infusion would not be required to be made into IRFC.

"Since IRFC can raise debt on its books to the extent of 10 times of its net worth, this decision of the Ministry of Corporate Affairs will enable IRFC to raise additional debt to the extent of over Rs 63,000 crore," it added.

A recent Allahabad high court judgment may, however, provide some relief with the court ruling that there shall be no tax levied in case of purchases made at duty free stores at the arrival or departure terminals.